Sunday, October 10, 2010

Marc Faber : Oct Market Commentary

Marc Faber is out with his monthly report in which he discusses quantitative easing, equity markets, the dollar, gold, and other commodities. Here are a few highlights:
1. Equity Markets--Faber was correct last month in predicting a rally based upon extremely negative investor sentiment. He is more cautious about October because stocks are very overbought according to the % of stock above their 50 day moving average. Another reason for concern, is that after a strong September, markets often fall sharply in October and November. He is underweight equities right now.

2. Emerging Markets--Countries like Indonesia, Malaysia, etc are likely entering a price bubble thanks to worldwide money printing. Faber would not be buying these high-flying markets right now even though they could enter a final parabolic phase. He would be selling positions.

3. Dollar and Currencies--The dollar is extremely oversold and investor sentiment is very bearish. Conversely, investors are very bullish on the Euro (96% bullish according to DSI). Faber believes that a inflection point could be at hand leading to a nice move upward move in the dollar. He would not be short the dollar right now.

4. Gold and Commodities--Because he is bullish on the dollar right now, Faber believes there could be a significant correction in gold and other commodities. This could be a rather large decline, but would represent a buying opportunity. Why? More QE would be on the way.

5. Bonds--If the market declines and the dollar surges, this would be good for treasuries. However, upside is limited to 2.08% on the ten year. Faber does not expect yields to fall to new lows.

6. QE--Almost a slam dunk, according to Faber. The decline in asset markets will provide cover for the Fed to print more money.